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Proactive customer engagement. It’s a tenet of Customer Success. We all do it to some extent – some of us better than others. The question is “How do you best go about structuring that proactive engagement so that you can scale a team and provide a consistently great customer experience?” The answer is “With a good Customer Engagement Model.”

A good Customer Engagement Model needs to be flexible in two key ways:

It needs to accommodate different phases of the customer lifecycle; and

It needs to support both scheduled and unscheduled interactions with customers

In a prior article on Time to Value, I pointed out that it’s critical to keep momentum going once the initial sales deal is closed and ensure that you aren’t diverging from your customer’s original path to reaching their objectives. Your Customer Engagement Model should, therefore, start at the time of sale in order to maintain momentum and achieve a first “quick win”.

Good Customer Engagement Models should also help keep you focused on answering the three key questions you need to know about every customer:

How is our customer measuring value?

Are they achieving that value?

Are we providing an experience that will result in loyalty and advocacy?

Irrespective of whether your company provides high personal touch Customer Success or whether your Customer Success model is more self-service, your proactive engagement with customers should be governed by an Engagement Model. A good Engagement Model helps you understand: A) what the engagement “moments” are for customers throughout their lifecycle; B) who in your organization is responsible for interaction with customers at those moments; and C) what the objective or expected outcome is for each of those moments.

I’ve illustrated what that model looks like conceptually in the image below:

The Phases:

The first key point of an engagement model is that it needs to work across two very different phases of the customer lifecycle, the Onboarding Phase and the Ongoing Usage Phase. The first phase, onboarding, is the much higher intensity, much more critical, and much more interactive of the two. I think of these two phases very much like the takeoff phase and the cruise phase of airplane flight. In the takeoff phase you’re in close proximity to the ground, there’s quite a bit at stake, it’s the phase where more incidents happen, and it generally requires a high degree of pilot focus. During the cruise phase of flight, it’s important that pilots monitor their instruments, ensure they’re on course, and pay attention to external factors. They can’t ignore that they’re flying an airplane during the cruise phase; however the workload, intensity, and immediate consequences are lower than during the take off phase. Pilot’s don’t need to give the airplane nearly as much of their attention during cruise as they do when they’re screaming down the runway, getting it airborne, dealing with heavy air traffic, and monitoring for even the slightest anomaly – which could have dire consequences if left unchecked. During cruise, a pilot can leave the cockpit to use the restroom. During takeoff, on the other hand… not so much.

The Onboarding Phase:

The Onboarding Phase serves two purposes:

It ensures that your customers are getting off on the right foot and are set up for success with your solution; and

It creates a logical opportunity for both you and your customer to think about, articulate, and agree on how you’re going to measure value in the ongoing phase.

In a “high-touch” customer engagement scenario, much of the onboarding phase may be done by a CSM or someone from the customer onboarding or training team. The customer needs to become familiar with your solution during this phase, and you need to ensure that they’re able to be self-sufficient when using it.

A “low-touch” customer engagement scenario will have the same objective, but will achieve it more with automated marketing/email campaigns, automated measurement and exception handling of early adoption indicators, and automated training for the customer.

In both the high and low touch models, it’s critical to measure early indicators of user adoption and determine what course corrections need to be applied. The method for measuring the indicators and for communicating to customers needs to be much more automated in the case of a low touch engagement model.

In addition to ensuring adoption and self-sufficiency, the onboarding phase in a high touch B2B/Enterprise Solution world provides an opportunity for you to validate key assumptions with your customer on how they are going to measure value and how they’re going to quantify the success of their implementation of your solution. If your sales process is value based, you have probably already begun identifying use cases, measurements, and customer ROI expectations. You may very well have also quantified the expected ROI from adoption of your solution. The bad news is that too many companies don’t do any further measurement once the deal is closed. A good onboarding process not only ensures that a customer is adopting your product but positions you as a partner to help ensure they’re making progress against their stated objective.

Example Engagement Moments during the Onboarding Phase (some of which are included in the sample model above) include:

A kickoff meeting to ensure that the customer meets your team (either virtually or face to face, as appropriate)

Confirmation that the customer has dowloaded / activated / or logged in

Initial Product Training

A formal review of the first set of metrics delivered by your solution. These should provide an indication of the customers adoption, usage, and effectiveness (how well they are doing x, not just that they are doing x).

A checkpoint with the customer to ensure that they understand how the product works and that they feel self-sufficient

In the spirit of Time to Value, it’s vital during the onboarding phase that the process moves as quickly and efficiently as possible and that customer momentum is maintained in the process. I’d strongly recommend two things to manage momentum:

Once you have defined your Engagement Moments, measure the time that it takes each customer to progress from one to the other. Analyze your metrics and determine whether there are any systemic delays in any of your phases of onboarding and work quickly to get to root cause. I’ve had teams shave weeks off of implementation/onboarding by measuring individual phases, identifying root cause for the delays, and then fixing the process.

Set escalation triggers if you don’t see adoption events occurring with your customers according to expected timeframes during the onboarding phase. If your customers haven’t created x accounts in y weeks for example, that should trigger proactive engagement on your part – in addition to the predefined moments in your plan.

The Ongoing Phase

The focus of the Ongoing phase is to ensure that your customer is achieving the objectives identified in the Onboarding phase and that you’re keeping a pulse on their experience.

Engagement Moments in this phase can be categorized into one of two types: 1) Time-based; or 2) Event-based.

Time-based Moments

Time-based moments are ones that you can put on a calendar, such as a Quarterly Business Review, Monthly Metrics Review, Annual Account Review, or even Weekly Meetings for your highest of high-touch customers. Time-based moments are great ways to keep your customers interacting with you for the duration of the lifecycle – as long as you clearly set expectations and provide valuable feedback to them during those engagement points. If you aren’t continuously providing value to your customers during these moments, they’ll lose interest and stop attending regular calls/meetings, so be careful not to over-schedule them, and be sure to provide relevant engaging content in each of these engagements. Dan Steinman from Gainsight recently wrote an informative blog post characterizing a good Quarterly/Executive business review.

Event-based moments are ones that are triggered by the occurrence of an event (or non-event in some cases), such as a customer logging a high-severity case with your Support Desk; a new product release from your company; a change in leadership or executive sponsorship at your customer; a poor or mediocre survey response; an absence of support cases over a defined period of time; a decrease in overall usage; or a decrease in key usage metrics from a given customer. The purpose of event-based triggers is to help you react quickly and appropriately to events that can influence the health of the customer relationship – for better or for worse. In either case, the sooner your team reacts to the event that triggered the engagement, the better off you’ll be.

Customer Engagement Models are unique to companies, products, and customer types. An Engagement Model for an enterprise customer with a highly complex solution will look very different than one for a consumer with an off-the-shelf SaaS offering and both will engage different parts of the organization. Logically breaking down that model into two key phases (Onboarding and Ongoing) and defining the Ongoing phase in a way that supports both Time and Event-based moments of engagement with customers should help you optimize for your products and customer types. You will likely end up with more than one engagement model for different customer segments.

Have you employed a Customer Engagement Model and what methods or tools have you used to ensure that the model is consistently applied across your customer base?

I was recently in a meeting in Europe and found myself talking to an experienced enterprise sales leader from another company about Customer Success. She asked me “How do you approach Customer Success in different countries and cultures where there’s a need for face to face interaction? In the US you do so much by phone: Inside sales, Automated support, Customer Success Management, and here relationship building is still important. We need the face time.”

Which got me to thinking…

While I certainly don’t advocate running a high-touch, high-cost business model for customer success if the revenue model doesn’t support it, creating that personal relationship is incredibly powerful. As many US companies begin to expand their Customer Success efforts into other markets, it’s essential to recognize that each geography can provide some valuable lessons and examples for others. Organizations can learn quite a bit by exporting and importing best practices across regions. I’ve certainly learned by observing interaction models in different markets and applying best practices from one region to others. Taking this approach benefits both your company and your customers.

As you look at taking the “best of” from each of your regions, you’ll find that you can increase touch in some regions while increasing efficiency and scalability in others. As you dissect how and what to apply across geographies, it’s important to understand what makes each approach successful.

The Case for a Higher Touch Model:

Many of the effective Customer Success models outside the US are higher touch (more face to face) for a few reasons:

The culture dictates it;

In many countries it’s easier due to the higher concentration of businesses in fewer regional city centers

It works. As much as we do over the phone and online in the US, in some cases it’s still important to build personal relationships through face to face interaction.

So when the opportunity arises, it’s important to engage with customers in as personal a way as you can. In many cases, an in-person meeting with a large customer is a great investment of time and money. It also proactively sends the message that the customer is worth your time and effort.

Other Ways to Connect:

As our conversation progressed, we also agreed that it isn’t possible to meet every customer face to face, and it certainly isn’t possible to meet any customer face to face 100% of the time. In every case, though, it’s important to connect with your customers in a way that is A) relevant and appropriate to them; and B) true to your company’s brand and mission. For example, companies who do content marketing extremely well don’t need to have face to face interaction with the vast majority of their customer base in order to connect with them. Companies like MailChimp, HubSpot, and ZenDesk build incredible connections with their customers via mainly digital communications. Their messaging is so good and so authentic that as a customer you feel like you’re a connected insider.

Authenticity and Relevance Trump All:

Whether its face to face or through broader communication, you need to connect with your audience in a relevant way. You have quite a bit of information about each of your customers. Make your communication with them relevant, whether you’re targeting digital content based on their behavior or you’re tailoring a detailed Quarterly Business Review based on their specific metrics.

Even in the case of broader-based digital marketing or one-to-many communication, it’s critical to both create targeted content for your specific audience and to deliver that content in an engaging, authentic, personal way. I’ve attended webinars with solid content, but disconnected, impersonal presenters. In almost all cases, the disconnectedness of the presenter unfortunately trumped the relevance of the content.

Engaging with someone face-to-face, especially one-on-one (or few-to-few) inherently creates a strong connection. In the cases where you’re engaging digitally with customers en masse, you need to do so with a compelling, consistent tone and voice. Many of us will communicate with the largest segments of our customer base primarily through a digital channel. We have to make that channel engaging, personal, and authentic. Send the message to the group, but communicate with the individual.

Do something different

As you think about face to face meetings, it’s worth noting that not all face to face interactions need to be at your customer’s site. If your office is in a major metropolitan area, chances are your customers might find themselves in your neighborhood occasionally. If so, host them for a corporate visit. Do your quarterly business review with them in your offices. Introduce them to some of your executives who they wouldn’t otherwise meet if everyone needed to travel to the customer site. Share your vision with them. It’s easy for us to fall into routines with our customers, so by holding meetings in a different context or venue, you have the opportunity to create memorable experiences.

As you engage with your customers, how are your learnings and practices from one geography creating more personal, authentic, relevant, and memorable experiences worldwide?

Whether you’re facing explosive growth or trying to manage your Cost of Services as you build out your customer facing organization, you know that you are going to be faced with real-world resource constraints as you fund and build a Customer Success function. And after all, you’re a responsible leader and this is 2013, so you know better than to just throw people at a problem. So how do you efficiently manage growth in a Customer Success organization while effectively empowering your customers?

In my last post, A Practical View of Your Customers, I introduced an approach for understanding and mapping your customers by revenue using a Pareto chart. While I focused that article on how to look at your customer segments based on revenue, I’d like to focus this article on where to draw the line for each segment and why. If you haven’t read the previous post yet, I’d suggest doing so now. If you’re familiar with Pareto principles, my prior post certainly isn’t rocket science. You may still want to read it, though, as I’ll be re-using a chart I introduced there to illustrate my points.

Customer Segmentation and Engagement Models

The First, High-Touch Segment

Unless your company is a rare blue unicorn and you have a completely homogeneous customer base, you’re going to have some distribution of current and potential revenue across that customer base. Creating a Pareto Chart will show you which of your customers make up the largest revenue contribution. While my hypothetical (but not uncommon) example in my previous post showed a top tier segment where 10% of the customers accounted for 45% of the revenue, your results may differ – possibly significantly. It is almost certain, however, that a minority of your customers will account for a majority of your revenue and very likely that a small tier will account for a significant percentage (greater than 30%). If this is the case, you have a great opportunity to create a premium service offering via Customer Success that will focus on retaining and growing those customers.

This tier of customers is incredibly valuable. You can afford to (and need to) provide them with some attention, and ensure that you have great two-way communication in place in order to both guide them as well as learn from them. If you’re in the early stages of building your Customer Success team, I’d suggest this first cut at determining how to build out this team:

Think about the key activities that are required to ensure your top tier customers are getting value from your product

Understand how much of a person’s time it will take to provide those activities

Multiply that time by the number of customers you have in your top tier, and then staff accordingly, understanding that your CSMs will likely be able to spend less than 100% of their time on the activities you just defined

Note that this is a bit of an iterative process, and you’ll be doing a few “reality checks” as you understand how much time is needed for your customers – and as a consequence, how many people will be needed to deliver the experience you want your customers to have. There truly is a combination of art and science to this process, and if you can’t afford to hire enough resources to adequately service the group you’ve identified as your top tier, then you have three options:

You can redefine and reduce the size of that tier then only expand it once you can adequately staff to support a larger number of top-tier customers;

You can redefine (reduce) the level of service you provide to your top-tier customers; or

You can introduce automation (customer success automation, marketing automation) to assist the CSM in managing the customer relationship

How much service and effort you provide to each customer is going to be specific to your offering. Once you’ve done your calculations, you’ll likely want to perform a reality check based on the Book of Business each CSM is projected to be responsible for. I’ve seen organizations where each CSM has a Book of Business of as little as $1M of annual recurring revenue and others where that number is closer to $10M… or more. Metrics and “standards” are still all over the map on this topic and are really dependent upon your industry and the level of service you need to provide to your customers. Early stage, highly-technical solutions will require more CSM effort than later stage “commodity” solutions. Whatever stage or solution you’re at, though, be sure that you’re creating a role that is going to be sufficiently engaged to help your customers achieve value.

A Second, Hybrid Segment (Optional, but likely)

Depending on your customer distribution, you may want to define a second segment of customers who still represent significant revenue, but are probably closer to a 1:1 ratio of percentage of customers to percentage of revenue. In the hypothetical example I provide, the second customer segment represents 20% of the customers and 30% of the revenue. Again, your mileage may vary; however if you have a second tier of customers that makes up a sizeable percentage of your revenue, then you can (and probably should) identify a less intensive, but still personal, level of relationship with them (perhaps less frequent interaction than tier one and perhaps assisted even further by marketing automation). By doing this, you now have created personal relationships with two segments of customers that likely cover a majority of your revenue, but only a relatively small minority of your customers. My example in the last post shows 30% of customers representing 75% of revenue. While my example data is hypothetical, I’ve seen a number of companies within +/- 10% of these ratios, especially in the B2B space.

So how many CSMs should you assign to this space?

A good reality check for the number of CSMs to assign to this group is to use your Book of Business per CSM as the great equalizer. You may have CSMs in group 1 covering 10-15 customers and $3M in ARR. In Group 2, with smaller customers , a CSM might need to manage 50-75 customers to cover $3M in ARR. Automation will play a key role here to help identify customers in need, customers at risk, and to trigger targeted communications to customers at the right time.

The Third, Highly Automated Segment

While you’ve likely covered a majority of your revenue base in the first two segments, you still have a long tail (actually a very long tail in cases like freemium) of customers who are using your services but – at least for the time being – provide you with very little revenue. This customer segment is certainly important, both from a numbers, lead generation, and future revenue perspective; however you can’t afford to provide them with the same level of service you provide to customers who are paying orders of magnitude more than they are per month, so what does automation for this segment look like?

Whether this long tail represents 300 or 300,000 customers, you’re going to benefit greatly from an automation solution (or solutions) that help you:

Identify customer usage patterns

Identify at-risk customers

Send appropriate communications to those customers based on behavior, triggers, or their lifecycle

Keep your entire customer base engaged by helping you connect with them in a relevant way

While the long tail doesn’t represent a majority of your revenue, both this segment and your second segment are going to contain customers who represent incredible upsell opportunities – if you do some analysis that will help identify them. If you spend the extra effort up front, you can also leverage marketing automation to target relevant messages to those customers based on their behavior, activity, and other usage metrics.

If your strategy is to land and expand, you’ll need to look everywhere for the expansion opportunities, not just in the top tier. And if you’re using analytics, segmentation and automation appropriately, you can drive meaningful action with the right customers, whether they’re in your “top” tier or in your long tail.

A few months ago I wrote a post about customer segmentation titled All Customers Are Equal, But Some Are More Equal Than Others. I graphically represented the concept of customer segments with a pyramid, because it was a simple and straightforward representation of the concept. When it comes down to actually segmenting your own customer base, though, and making decisions about how to service them, I’ve found the best way to do that is to use a Pareto Chart.

Figure 1: Pareto Chart of 2000 Hypothetical B2B Customers

The Chart Described

If you aren’t familiar with the concept, a Pareto Chart is great way to visualize how your revenue is distributed across your customer base and how much your largest customers contribute to your overall revenue.

The chart above came from a hypothetical set of 2,000 customers I created from data that I made-up to represent a typical B2B customer distribution curve. The grey portion of the Pareto Chart is actually a bar graph made up of 2000 data points in descending order. Each (very thin) bar represents a customer’s Monthly Recurring Revenue (MRR) and maps to the axis on the left – in MRR dollars.

The blue line shows the cumulative percentage of revenue represented by the customer base as it moves along the X axis and maps to the axis on the right – in percentage of total revenue.

Creating Your First Segment

The Pareto chart quickly shows you a couple of things:

How your customers are distributed

How many customers fall into each bucket so that you can efficiently allocate resources to manage a large percentage of your revenue base.

The image below takes this hypothetical (but not uncommon) B2B case and creates a first segment of customers. This segment happens to consist of approximately 10% of the customer base (It’s 200 grey “bars” wide, representing 10% of the 2000 bars in the graph) and approximately 45% of the revenue (the right edge of the green area intersects the blue “% of revenue” line at about 45%). You’ll also see that the MRR value at the right edge of the green area is approximately $5,000 – which represents the minimum MRR for a “Tier 1” customer. Again, these numbers are examples. The process for creating customer segments requires a little art to go with this science and is going to take some iterations to get right; however 10% of your customer base is a reasonable baseline number for a high-touch CSM organization. You may choose to make it larger or smaller for a number of reasons (which I’ll cover in a future post), but this framework is a good way to illustrate it and justify whether you’re covering a reasonable amount of your revenue base.

Figure 2: The First Segment

The Second Segment

Now that you’ve created a high-revenue customer segment that can justify a high-touch CSM, you might want to see whether it makes sense to cover another relatively small number of customers that still might represent significant revenue with a somewhat lower touch, but still personal, approach. Based on this customer distribution, you can see that a second segment can be created that consists of twice as many customers as the first segment, and in combination with the first segment gives you coverage for approximately 75% of monthly revenue.

Figure 3: The Second Segment

Pareto Charts can illustrate pretty clearly how much revenue is represented by each segment of customer as well as show the baseline MRR that can be used to define the “floor” of each segment. Figure 3 shows that in this hypothetical situation, 75% of the revenue is represented by approximately 30% of the customer base, with an MRR of $1,700 and above.

So Now What?

Now that you have a framework for segmenting your customers, you can optimize your investment in your CSM function. In this example, the first segment of customers represents significant revenue that can justify high-touch named CSMs who can engage with customers in a personal, frequent, and customized manner. The second segment consists of roughly twice as many customers and a little over half the overall revenue of the first segment, so the amount of engagement per customer that can be justified for each CSM is significantly lower. The third segment represents approximately 3/4 of total customers yet only 1/4 of total revenue and can be effectively managed with Customer Success Automation and Marketing Automation. I’ll discuss how to address these three very different customer segments in more detail, and how Customer Success Automation applies across all three in a future post.

In my last post, I introduced the concept of an Effectiveness Model as a framework for engagement with your customers. I introduced it in the context of four other steps to delivering value, but since it’s so fundamental to value delivery, I’d like to drill down on what it is and why it’s so important:

The Concept

The Concept is straightforward. As a provider of a solution, you should be doing more than just throwing software over the transom to your users. In fact, as a SaaS provider, you need to be proving value to them on an ongoing basis. That’s today’s reality. If you don’t, you risk losing your customers to competitors who will. Harsh, but true. Providing a framework for mapping your customers’ progress, comparing their behavior (and results) to “best in class” companies, and showing a path of progress to best practices will help your customers remain engaged with you. The idea isn’t new. The “Maturity Model” concept has been around for years in a heavier weight format, and while more complex models and engagement levels apply in B2B, B2C solutions can also benefit from defined models that encourage additional types of usage and provide your customers with a roadmap to become more effective at using your product.

In the image above, each box represents a stage in an example Effectiveness Model for CRM. The bullet points next to the boxes each represent behaviors representative of each phase. The process of creating a maturity model for your industry and solution isn’t complicated, but it isn’t just something you can churn out quickly without some careful thought.

Identify 3-5 phases that are indicative of customers’ implementation of your technology. You may want to start with the bookends. For your first phase, identify the basics that someone absolutely needs to implement in order to get value from your application. For your last phase, identify what the absolute, best-in-breed, thought leaders who have, or will implement, your type of technology are doing. Then map out 1-3 interim phases that are indicative of how companies would progress through the phases. The CRM Effectiveness Model I put together above is an example of what that might look like.

The concept is simple. Getting it right, however, will take iterations, critical review, and more iterations.

The Name (Effectiveness vs Maturity)

While “The Industry” has traditionally referred to models like this as Maturity Models, I’ve stopped using that term in customer interactions and internally. I was once in a meeting with a large, strategic enterprise customer and presented the concept of a “Maturity Model” that my team and I had created. I thought nothing of it for a split-second, as these types of things had been called Maturity Models for years. My team and I had spent a good amount of time developing and iterating on a model specific to my company’s industry and showed them characteristics of “mature” vs “less mature” companies. As I listened to the words come out of my mouth, however, and observed my customer’s body language, I realized that the term “maturity” sounded arrogant and condescending. From that point on, I’ve referred to these as Effectiveness Models given that we’re simply trying to make our customers more effective. It’s ok for me to use the term “maturity” when talking to my kids about assuming more responsibility as they get older. It isn’t ok for me to imply to my customers that they are immature because they aren’t using automation and deep analytics. Trusted advisor trumps arrogant vendor. Every time.

Giving Context to Your Customer Communications

Your customers are busy. They’re struggling with priorities just as you are. Whether you know/like it or not, you’re competing for their attention every time you reach out to contact them. I think any customer facing team needs to be aware of two golden rules: 1) Make sure the customer goes in to the call looking forward to getting value from their interaction with you; and 2) Make sure you’ve delivered that value by the end of the interaction so that they are looking forward to their next meeting with you. An Effectiveness Model sets you up for success. Your conversations with your customers are framed around objectives that you’ve set out with them. Your standing meetings and conversations with them can then be framed around what they’re doing (and how you can help them) to make progress.

The Value of Demonstrating Progress

There’s always a need to justify ROI, and to the extent you can do it with hard data, by all means, continue to do so in a way that is meaningful to your customers: Point out how many transactions they’ve performed in your system; if there’s a way of quantifying end objectives, like e-commerce transactions that have resulted from use of your application, then be sure to communicate those. In addition to those concrete numbers, or in cases where the concrete numbers are difficult to capture, it’s important to show your customers progress towards stated objectives. The Effectiveness Model provides a picture and path with clearly defined behaviors and objectives to map that progress. You can use this as a way to both map progress over time as well as identify activities and strategies to achieve the next phase of Effectiveness. Demonstrable progress, together, is a great foundation for a loyalty-based relationship.

An Opportunity to Position Key Features of Your Solution

As you create your industry/company’s specific Effectiveness Model, you have an opportunity to define how key features in your product can help your customers advance along the model. Be extremely careful, however, to avoid being overly self-promotional here or to “force-fit” your features into the model. An Effectiveness Model is just a tool to help advance a trust-based relationship with your customer. The model needs to be genuine and in your customers’ best interests. The reality is that if you have a great product and if you understand your customers, you can make some wonderful, insightful recommendations for them that will provide them with significant benefits, increase their use of your product, and make them more loyal in the process.

If you’ve been using an Effectiveness Model with your customers, I’d be interested in hearing about your learnings and feedback from them. If not, what have been your obstacles to developing one? Send me a dm on Twitter: @nfranco. Thanks!

Like this:

Creating demonstrable value is the single most important objective of a Customer Success organization. Renewals, upsells, references all happen when you have a relationship based on value with your customers. While achieving that objective requires input and contributions from Marketing, Sales, Professional Services, and other parts of the company, the Customer Success function owns the primary responsibility. Some companies do an incredible job at delivering and proving value to their customer base; however many companies (some would argue most) are working to put a model and plan together to demonstrate value for their customers.

The steps I propose for getting there are, at a high-level, very straightforward:

Identify a Framework and Representative Behaviors for Each Phase

Identify Meaningful Quantitative Metrics

Perform a Benchmark

Create an Improvement Plan

Measure Against Plan, Provide Feedback, and Revise

Getting them right, however, is by no means easy. Each one of them takes thought, analysis of data, and iteration. The metrics and behaviors you need to identify are going to be unique to your space – and if identified well, will actually be unique to your company, so that you can measure value based on true differentiators that you offer.

So I offer these 5 steps not to make the process look easier than it is, but rather to provide some guidance as you take on your most important task as a company: continuing to earn your customers’ business.

Step 1: Identify a Multi-Phase Framework and Representative Behaviors for Each Phase

Every exercise needs an objective, and ideally a roadmap to get there. A framework provides your customers with a “bigger picture” view of the landscape and what they should be thinking about in order to be more effective at what they’re doing. Frameworks also give customers some perspective on where they fall with respect to industry leaders and laggards.

Figure 1: Example of Maturity/Effectiveness Model

One framework that works well is a Maturity (or “Effectiveness”) Model. These models generally consist of 5 (plus or minus 2) categories that represent different levels of maturity/proficiency/effectiveness in your space. In order to define these categories (or levels of maturity), identify behaviors that are characteristic of each of those levels and associate those behaviors with each level of proficiency/maturity as shown in Figure 1 above.

Customers can look at a framework like this and quickly conceptually grasp the types of behavior/activities necessary in order to advance along the model. As you develop this framework for your product and space, ideally try to map some of the behaviors that are associated with maturity levels to features of your product, so that you can easily associate customer usage of valuable features with their progress along the Maturity/Effectiveness Model.

Step 2: Identify Quantitative Metrics that Matter and Can Be Measured

In order to objectively measure progress on an ongoing basis, you will need to identify relevant quantitative metrics that drive value, are measurable, and ideally are good indicators of customer health/stickiness. For example, in the case of a CRM company, you may want to know your customers’ conversion rate of leads or opportunities in order to understand whether you might be able to help them become more effective with your marketing automation solutions. In the next steps, you’ll compare this data to benchmark data for a given customer and measure improvement. You can also compare these metrics to aggregates for “like” companies. As you identify target metrics, you’ll need to distinguish which ones are considered “usage” metrics that you can obtain directly from your SaaS application and which ones will require consent and participation from your customers to obtain.

Step 3: Benchmark Your Customers on Day 1

It’s important to understand the specific stage where each of your customers fit in the model/framework you’ve created, and it’s also important to get some baseline data on quantitative metrics as well. For larger, higher-touch customers, you should be able to understand this during a consultative sales process; however even with lower touch customers, you should be able to characterize/segment new customers based on system configuration, features purchased/implemented, and initial capture of the quantitative metrics you identified in Step 2 for that customer segment.

Step 4: Create an Improvement Plan

This step is critical and is a combination of art and science as it can be challenging to set targets at the right level. Your primary objectives should be to:

Set targets that are based on incrementally improving from the baseline you measured;

Encourage practices and usage of product features that will advance your customers along the Effectiveness Model you defined in Step 1;

Create a structure and context for the ongoing digital and interpersonal communications you will have with your customers.

Step 5: Provide Constant, Ongoing Feedback on Progress Against the Plan – And Revise as Necessary

Now that you’ve defined a framework, key metrics, and a plan for improvement against a baseline which you’ve captured, you can engage with your customers in a meaningful way that is focused around helping them get value from your product and become better at what they do. And you can measure their progress against defined objectives.

As a first step, you may want your CSMs to interpret system data and personalize recommendations to individual, high-value customers.

As you expand this offering to additional customers, you will need to define customer behavioral segments based on the metrics you’re capturing and provide those customer segments with extremely relevant digital content. For example, if you’ve identified a subset of your customers whose systems data indicate that they haven’t been using a key marketing automation feature of yours and that their conversion data hasn’t improved since their baseline, you can begin a drip marketing campaign to them on best practices in marketing automation and how to use your product to improve those metrics. That specific message should only go to that identified segment of customers, though, as you don’t want to “spam” your other customers with information that isn’t relevant to them. Your marketing team segments prospects based on behavioral data and delivers relevant content to them. You should target communications to your customers using similar logic. Great technology already exists to help you do this.

Helping customers improve and become better at what they do through their partnership with you is one of the greatest ways that you can demonstrate value. You don’t need to demonstrate it for all customers on Day 1. In fact, the sooner you can deliver it to some customers, the better. You can begin by implementing this model in a manual way with your most valuable customer segment, then roll it out to your broader customer base by segment – perhaps as you deploy additional Customer Success Automation and Marketing Automation tools. Hmmm… I bet a Customer Success Maturity/Effectiveness Model would fit in perfectly right about now…

One of the most common organizational questions/challenges facing SaaS companies is figuring out which group has responsibility for up-sells and cross-sells. Is it CSMs or Sales? If Sales, is it the same sales team that does the hunting for new customers? If it’s some combination, where do the lines get drawn? Before getting into the framework for making this decision, though, I think it’s important to clarify the primary purpose of a CSM organization in a SaaS company: Ensuring customers are getting value from the SaaS offering.

Value: The Primary Role of the CSM

The framework I’m proposing makes the fundamental assumption that the primary objective of a CSM function should be to help a customer base achieve measurable value and results from a company’s product or service. Without that value-based foundation, any renewal, up-sell, or cross-sell attempt is an uphill battle. The objective of the CSM function should be first and foremost about creating and maintaining a value-based relationship across a set of customers, whether high-touch or low-touch. That foundation then breeds loyal customers, advocates, and additional revenue.

So… if the CSM role is fundamentally about the value relationship, how involved in the up-sell, cross-sell, and renewal transactions should they be?

The reality is that every organization has different characteristics and there is no one “silver bullet” organizational structure for Sales vs CSM responsibilities. One way to approach the question and determine what’s right for your company is to look at the key factors that determine how that responsibility is distributed across the following three potential groups or methods:

1) Web / Self Service

2) CSMs

3) Sales

Figure 1.

The Service Dimension: Complexity of the Customer Service Interaction

CSM involvement (and value) in the sales process will be greatly influenced by the amount of assistance/interaction your solution requires in order for your customer base to really get value. Is it completely self-service, self-installing, requiring zero human interaction or does it require significant assistance, mentoring, education and coaching by someone on your CSM team? While there is no absolute way of measuring degrees of complexity, you may want to ask yourself a few questions like: “Can my customers (or some segment of my customers) achieve value without the interaction of a CSM?”; or “Is my company’s product meant to be completely self-service without the need for any human interaction, or is there a heavy Services and consultative component required for my customer base to obtain real value from my product?” This line of questioning will give you an idea of how much value a CSM would provide in the upsell, cross-sell, or renewal opportunities. If a high-touch CSM relationship is necessary to help customers get value from your product, a similar interaction model is likely necessary in order to position the value of additional services or offerings.

The Sales Dimension: Complexity of the Transaction

Some solutions have a low-friction commercial aspect to them. Think online transactions. Low-volume, online purchases from a published price list clearly fall into that category. A small business user signing up for MailChimp, or an individual or workgroup signing up for DocuSign can be completely accomplished via web-based transactions with little (or no) human interaction required. Enterprise, high-volume, or non-standard pricing scenarios, however, will require interaction and likely negotiation with a sales rep.

While each of these dimensions is straightforward in and of itself, looking at your offerings across both dimensions can give you better insight into how to structure your organizations. Also note that this framework isn’t intended to apply to your entire company and/or product line. It can be applied to individual customer segments, markets, product lines or service categories.

The scenarios also tend to get more interesting when you look at high complexity service offerings which also have high complexity transactions. An example of this would be a high volume / enterprise agreement with a customer for a highly consultative solution offering or managed services provided in addition to the SaaS platform. Any modification to this kind of agreement will require custom pricing, negotiation, and a consultative sale involving an expert in the deal. In this scenario, Sales and CSMs might team together in a manner similar to Sales and SEs would for new business opportunities. This scenario is represented in the upper right hand corner of the charts.

The Third Dimension: Revenue

There is an obvious third dimension here, and that’s the ACV (or CLV) of a customer. In those cases, the quadrants would shift closer to the axes for high ACV/CLV customers as they would warrant a higher touch, while the quadrants would shift away from the axes for low ACV/CLV customers as they would warrant a lower touch (see figures 2 and 3 below, respectively).

Figure 2

Figure 3

So… while there is no single answer for assigning responsibility across the organization. This framework provides a way to help distribute responsibilities based on some key factors.

Which factors have you used in determining how to structure your organization’s up-sell and cross-sell responsibilities… and how have you addressed compensation and incentives in each model?

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With all the Orwellian quotes from 1984 being tossed around as a result of PRISM, I thought I’d use one from his other book to describe the paradox of customer service for those of us who have ever supported a large and diverse B2B customer base. How do you provide a *great* experience for all of your customers in a scalable manner while creating something truly exceptional for your high value customers?

Well, first, you need to understand your customers – and while it’s actually not that uncommon for many startups in the SaaS space to have very good aggregate metrics such as CAC (Customer Acquisition Cost), Conversion Rates, etc., many companies don’t necessarily have individual customers very well segmented into logical groupings of actual and strategic value to the organization. It’s ugly, but it’s true, and it’s because a number of startups have gone through a growth process that looks something like this:

1) Invest in product and build it;

2) Invest in sales and grow the customer base;

3) Realize that the growing customer base is now large enough that it needs to be proactively managed and scramble like crazy to get the recurring revenue base under control.

Customer Segments

If you’re at this stage, getting things under control and categorized can actually be pretty straightforward. It just takes some thought, focus, and basic analysis. I’ve blogged about some of the technologies that are emerging in the space of revenue renewal management or Customer Success Automation. The reality, though, is that most SaaS companies, especially early stage ones, don’t yet have an analytics or Customer Success Automation solution to provide them with good insight into their customer base using real data-driven scoring and early warning systems across all customers. This post focuses on how to segment customers in the short term using basic data that you already have on your existing customer base (MRR, ACV, CLV, plus some other identifier for “strategic” accounts) …and it starts with the 80/20 rule.

The Top Tier: The “Most Equal”

While it may not be exactly 80/20, the reality is that in the vast majority of B2B SaaS companies, some small percentage of customers will represent a very large percentage of their revenue. Those customers are very high value and need to be treated as such. Create executive relationships and multiple touch points. Invest in them. Meet them face to face. Get to know them. Involve them in your business. Provide detailed monthly or quarterly business reviews that give them an indication of progress against stated objectives that you’ve worked out with them in advance. Determine the set of services you should be providing to this tier of customer and identify the amount of time it will take on an ongoing basis for your CSMs to provide those services to a model customer, then understand how many customers you can reasonably and consistently service given that time requirement… Congratulations, the laws of time and space just helped you create your first cut at your top customer segment.

Until you add more trained, senior, CSMs to your team or modify the level of service, you shouldn’t try to service more customers than you can at this level. If you over-commit, you risk missing on delivery expectations and you’ll leave your customers, er, less than satisfied. That may sound obvious, but getting from today’s reality to tomorrow’s desired state needs to be carefully managed. Next, determine how many customers you would like to see getting that level of service and either staff up your CSM team or pare back your service offering slightly (or some combination of both) in order for your needs and reality to align. Whatever number you come up with, you will need to justify it financially and take it into consideration when calculating your cost of services. A good initial target to shoot for if you’re a B2B SaaS company is to get 40% of your revenue into this bucket. In many cases it will be represented by fewer than 10% of your customers. Your mileage may vary, of course; however a reasonable range seems to be 1/3 to 1/2 of revenues represented by this customer tier for B2B SaaS companies.

The Second Tier: “The Most Leveraged”

While a high touch model works for that small percentage of customers who represent between 1/3 to 1/2 of your revenue, the law of diminishing returns takes over quickly and that model won’t scale to service the rest of your customer base. In this next tier, each CSM will handle significantly more customers (sometimes up to 10x more) than their “Top Tier” counterparts and they will need automation in order to be effective.

Try to identify useful data that you can extract from your systems, and automate its delivery to your customers via Customer Marketing and drip campaigns that are “signed” by the CSM. Compare that customer’s data against relevant benchmarks or aggregate data from the rest of your customer base. The more you can automate the heavy lifting and position your CSM as the expert who can provide some context, insight, and recommendations around the data presented, the more you’ll position your Customer Success Managers for success.

The Third Tier: “The Most Scalable”

Some percentage of customers, (in many companies this group might represent the majority of them) are not going to generate revenue sufficient enough to justify the cost of a high-touch relationship – especially with respect to proactive communication with customers. In order to support this tier of customers, a company needs to build out great self-service tools, including a self-service portal and an excellent customer marketing program… and they need to have a product offering for this tier that is intuitive and continuously improved as a result of customer feedback. Companies like MailChimp and ZenDesk are poster children in this space for what to do and how to do it. They provide great content. They also understand that many of their existing customers interact with their company primarily online, so they focus on creating a powerful, bonding, consistent online experience for their customers. Philosophically, they don’t see a “low touch” model as “low service”. They see it as a way to create a consistent, powerful, engaged relationship with their customer base – at scale. Understanding the importance of getting the product experience right, they also constantly listen to customer input, concerns, and challenges and respond by continuously making their product easier to use, more prescriptive, and less support-intensive.

While every company’s distribution of customers across these segments will vary with respect to percentage and number, and while your specific circumstances might require one more (or fewer) segment; understanding and segmenting your customers will help you focus on taking the right steps to provide the right level of service to each of them and create a great experience across all of them.

How have you segmented your customer base and what challenges have you faced in the process?